Two current accounts are offering you £100 to switch. Jane Baker weighs up the pros and cons.
I know we harp on about current account switching here at lovemoney.com, but two-thirds of you haven't moved on to a new bank since 1999*. That means you could be missing out on a great deal by sticking with the old faithful.
Unfortunately, current account switching is tarred with the 'too much hassle' brush. But it doesn't have to be that way. These days, several banks offer dedicated switching services to make the whole process as painless as possible.
Of course, I can't promise there won't be any hitches. But I'm pretty sure most of you will find it far easier than you thought.
Switching bonus
Right now, some banks are so keen to get your business that you'll be offered some really mouth watering incentives. For instance, if you switch your direct debits to the Alliance & Leicester Premier Current Account or Premier 50 Current Account, you'll get £100 cash in return. The same tempting bonus is also available if you move your account to First Direct.
But there's no point taking the cash unless the account stacks up. So let's take a look at what's behind the bonus:
Current accounts with switching bonuses
|
Current account |
Switching bonus |
In credit interest rate |
Overdraft rate |
Other conditions |
|
£100 |
0.50% on balances up to £2,500, 0.10% thereafter |
0% for 12 months then 50p per day usage fee capped at £5 |
Account must be funded with £500+ per month |
|
|
Alliance & Leicester Premier 50 Current Account |
£100 |
5% on balances up to £2,500 for 12 months, 1% thereafter. Balances over £2,500 earn 1% |
0% for 12 months then 50p per day usage fee capped at £5 |
Account must be funded with £500+ per month |
|
£100 |
0% |
£250 interest-free buffer, 15.9% for overdrafts over £250 |
Account must be funded with £1,500+ per month |
The over fifties get a really great deal here whether you're usually in the red or the black. The A&L Premier 50 account - which is specifically for those aged 50 and over - offers the best in credit interest on the market. In fact, with a rate of 5% it's even better than the best buy savings accounts!
What's more, you'll get an interest-free overdraft for the first 12 months too. After that, you'll be charged a daily usage fee of 50p a day, with a maximum monthly charge of £5. And, on top of all that, you'll get the £100 swtiching bonus. (Although I think an account this good doesn't really need a sweetener!)
But the under fifties don't get quite such a good deal with the A&L Premier Current Account. It pays a much lower interest rate on your balance of just 0.5% on the first £2,500 and 0.10% thereafter. That said, if you count the switching bonus as compensation for earning little interest, then on a constant balance of say, £2,500 you would have earned the equivalent of 4% over a year.
In today's climate of ultra, ultra low interest rates I think that's still pretty good. And there's nothing to stop you transferring the excess cash out of your current account and into a savings account which pays a better rate.
On the other hand, if you tend to slip into the red every now and again, the A&L Premier Current Account comes up trumps with the same year-long interest free overdraft as the Premier 50 Account.
First Direct
Turning to the First Direct, you'll also get a £100 bonus by switching to the 1st Account. In fact, First Direct is so convinced you'll be happy with your new account, that if you're dissatisfied with the service after six months, they'll help you move to a new bank. What's more, they'll even give you another £100 for the inconvenience. You can't say fairer than that!
But it's not all good news. Like hundreds of other current accounts, the 1st Account pays absolutely zero interest on your balance. This is not likely to appeal to you if you tend to keep a large balance in your account. But again, you can get round that by sweeping the excess cash out and moving it into a high interest savings account.
So, if you don't mind moving your money about a bit, this shouldn't be too much of a problem. But there is one real drawback: You must pay in £1,500 or more into the 1st Account every single month. This is fine for those of you with a net monthly salary (or other income) of at least this amount, but it excludes everyone else.
It's a pity this account isn't open to all of us regardless of earnings. A&L do a lot better on this point with a monthly funding requirement of just £500, which should be within the reach of most of us.
Often I find that accounts which offer attractive incentives are hiding a nasty catch or two. But I'm pleased to say when it comes to current accounts, the switching bonuses really are worth it.
*According to research from Alliance & Leicester.
Compares current accounts at lovemoney.com
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